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Eurozone on the brink: Europe to be crushed by deepest recession since Great Depression CORONAVIRUS will send the global economy into free fall, unleashing the worst recession since the 1930s Great Depression, the International Monetary Fund has warned - and Europe is expected to bear the brunt of the economic crisis By JOE BARNES, BRUSSELS CORRESPONDENT PUBLISHED: Apr 14, 2020 Global economic growth “will turn sharply negative in 2020”, with 170 of the IMF’s 189 members experiencing a drop in their GDP, according to IMF chief Kristalina Georgieva. The Bulgarian added: “In fact, we anticipate the worst economic fallout since the Great Depression.” She said hundreds of billions of dollars of foreign aid would need to be mobilised to assist emerging and developing countries. “Just three months ago, we expected positive per capita income growth in over 160 of our member countries in 2020,” she said. “Today, that number has been turned on its head: we now project that over 170 countries will experience negative per capita income growth this year.” Ms Georgieva warned situation could continue to worsen if the global pandemic fails to fade in the second half of the year. “I stress there is tremendous uncertainty about the outlook: it could get worse depending on many variable factors, including the duration of the pandemic,” she said. But in a separate forecast, the European Central Bank has predicted the Eurozone will experience a deeper recession than the rest of the world.
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The European Union’s 19-member single currency bloc might not show proper signs of recovery until next year, according to ECB vice-president Luis de Guindos. Germany, the EU’s largest economy, is expected to shrink by nearly 10 percent in the first quarter, while France is also expecting a hit by about six percent in the current period. Mr Guindos said: “In the euro area, the most likely scenario is that we will see some signs of growth starting in the third quarter, but we will have to wait until 2021 to see a genuine recovery in economic activity. “In any case, 2021 will not be able to make up for all of the downturn in 2020.” The ECB has unveiled huge stimulus plans to kickstart the economy, paying banks to lend to ensure cash keeps flowing to companies and households. Decision makers at the Frankfurt-based central bank have also committed to buying more than €1 trillion of debt to help reduce the cost of borrowing across the bloc. Eurozone finance ministers last weekend ducked a major decision on sharing the debt burden of fighting the coronavirus. They, however, agreed more minor plans for an EU package to soften the pandemic’s economic impact. The deal will open up precautionary credit lines of up to €240 billion, a potential €200 billion increase in lending by the European Investment Bank and a temporary EU unemployment scheme worth €100 billion. But they failed to reach a deal on the so-called “corona bonds, a joint debt instrument designed to share the borrowing costs of the economic recovery. The Eurozone committed the EU to fund what would be a “temporary, targeted and commensurate with the extraordinary costs of the crisis and help spread them over time through financing”, a joint text said. The biggest battle was over whether access to the European Stability Mechanism would come with the need to implement tough economic reforms or austerity measures. Both Italy and the Netherlands claimed a victory after the meeting bought a temporary halt to the bitter row over the bloc’s response to coronavirus. The Dutch said conditions will remain in place and the Italians claimed the opposite, leaving the fudge unlikely to allow Rome to access the emergency funds in the future.
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